Proposition 30 – No: Measure won’t help volatile tax system

It is time for independent thinking in California. In 2008-2009, our state experienced the worst economic recession since the state tax system was first created in the 1930s. State tax revenues dropped precipitously, but state spending didn’t, so our state began a period of extraordinary budget deficits. In January of this year, Gov. Jerry Brown stated the deficit was $9 billion. In May, the projected deficit ballooned to $16 billion, and the budget depended on $1.9 billion in anticipated tax revenue from the Facebook IPO. Now the Department of Finance predicts only $283 million of Facebook-related tax revenue. No household or business could survive this way, let alone the state of California.

What is the cause of this budget mess? Two bipartisan groups, one a commission established by the governor and the Legislature, and one private-sector group, came to the same conclusion – we have an outdated tax system. Heavily dependent on the personal income tax and the corporate tax, our unnecessarily complex tax system impairs economic growth and creates big swings in our revenues. We need to reform our tax system so that (1) we have more reliable and stable revenue; (2) our system encourages economic growth and job creation; (3) our state can compete more effectively; and (4) our system is simpler and remains fair.

Instead of reforming this broken system, Sacramento politicians are going to taxpayers with Proposition 30 looking for a $6 billion a year tax increase to fill the ever-growing budget gap.

Proposition 30 is a prime example of how to perpetuate our broken budget and tax system. It proposes to increase personal income tax rates for seven years, retroactive to Jan. 1, 2012. The increase will further hurt our economy and continues our reliance on volatile taxes, thus ensuring the state will continue its boom and bust cycles. If that’s not enough, it also raises the sales tax for four years. The $1 billion sales tax increase will hit all Californians as the price of everyday items, such as gas and clothing, will rise.

Proposition 30 is particularly harmful to “mom and pop” businesses when they can least afford it and when our economy is depending on them for recovery. These small businesses are the engine for job creation. However, these tax increases may force family businesses to cut jobs or raise prices to pay the higher income and sales taxes. The last thing we need to do in this economy is kill more jobs and force more businesses to close.

In order for California to make strides against wasteful spending, volatile taxing and unmerciful cutting to programs, it has to first reform itself and then look for additional revenue as necessary. Proposition 30 does nothing to reform our broken revenue system and makes volatility worse, something many proponents of the measure publicly acknowledge.

Californians are being told that if Proposition 30 does not pass, deep cuts will be made to our public education system. In other words, Sacramento politicians are holding our kids hostage to Proposition 30. That is rather absurd. It appears that the politicians created this education crisis in order to secure more votes for Proposition 30. The governor and the Legislature could decide, by a simple majority vote, that public education is too important, and could find other ways to balance the budget. They had every opportunity to reform our tax system and provide resources directly to our children. And contrary to claims of proponents, Proposition 30 does not ensure that funds will go to education. The Legislative Analyst’s Office says its funds “would be available for a wide range of purposes … including funding existing state programs.” Based on history, we should know what will happen if Proposition 30 passes – “existing [pet] programs,” not education, will receive the funding.

One thing is clear, if Proposition 30 passes, we will not see the reform we so badly need. Instead, it will give Sacramento politicians the ability to carry on the status quo, saddling our children and grandchildren with higher taxes. California must institute real tax reform first if we plan on fixing our problems, and Proposition 30 will only perpetuate our broken revenue system.

I suggest we vote no on Proposition 30 and send a message to Sacramento that our children deserve better.